Tesla is too big to fail —but not for the reason you might think (TSLA)

Tesla has been blistered by criticism for months, but the company and CEO Elon Musk are still standing.

Tesla survived the summer and Musk settled with the SEC just in time to witness the UN issue its most dire warnings about global warming to date.

If we have only until 2040 to drastically reduce the warming trend, we can't afford to lose Tesla and the potentially millions of electric-vehicles it could sell.

Is Tesla made of Teflon?

You could be excused for thinking that after the insane summer the company and CEO Elon Musk just concluded. There was the ongoing battle against short sellers, Musk's accusing a diver involved with the Thai rescue of pedophilia, the now-infamous "funding secured" go-private tweet, all the other tweets, the tearful interviews, the mad Model 3 production rush, the assembly line in a tent, the SEC lawsuit, the SEC settlement. Oh, the humanity!

And yet, even amid a market rout last week that dealt out considerable pain to tech stocks, Tesla hung in there. True, shares slid. But if you think the company is overvalued anyway, settling at around $250 makes sense.

In a few weeks, Tesla will report third-quarter earnings, and the results are cued up to show a profit, or at least something pretty close to a profit. It would be Tesla's first since Q3 of 2016. If it comes to pass, it should be enough to calm the gales of negativity around Tesla, if only briefly ... as long as Musk doesn't undermine the positive news by doing something ill-advised.

For what it's worth, Tesla's quarterly revenue should also surge, reminding investors that even as the company burns through a mountain of cash, it's building another mountain of new money with its ever-increasing topline.

Tesla could finish the year having delivered between 200,000-300,000 vehicles, a massive improvement on 2017's total of 100,00, itself a record for the carmaker. Even though the electric-car market is tiny — merely 1% of global sales — and despite several major competitors launching new EVs, Tesla has the space to itself. Most electric cars hitting the road these days are Teslas.

The indispensable company

This makes Tesla an anchor brand and, regrettably for the company's naysayers, something of an indispensable company. With a current market capitalization of $45 billion, even after last week's sell-off, Tesla's long-ago $461-million loan from the Department of Energy looks like a phenomenally good bet that has achieved what it set out to do: create a viable electric-vehicle market in the US.

Despite the Trump administration's hostility to global-warming science, the release last week of an objectively terrifying report from a UN special panel on climate change makes clear that unless humanity does what Musk has always wanted it to do — leave the fossil-fuel era behind — then disaster could strike as early as 2040.

To avert a potentially existential threat to civilization, we're going to need a lot more electric cars to replace gas-burning ones, and we're going to to have to generate the electricity using a combination of nuclear power and renewable resources.

Sometimes it's good to both know what you're up against and to have a deadline. Two decades is enough time to replace much of the developed world's supply of automobiles with electric-powered alternatives. Of course, we have to start now, and we can't afford to lose Tesla's footprint. The only other successful EVs on sale at the moment are the Chevy Bolt and the Nissan Leaf, and while they're selling OK, they aren't matching Tesla's impact.

Why Tesla is too big to fail

The bottom line is that the species needs Tesla to sell 200,000 cars this year, 400,000 cars next year, and as soon as possible, millions of vehicles annually. And that alone won't be enough. All the other automakers need to join Tesla and replace the planet's one billion gas-burning cars with much cleaner alternatives.

This means that Tesla is too big to fail, even though it isn't very big. What's actually too big is Tesla's impact; without Musk's urging, the limited electric-car race we're now witnessing wouldn't have happened. If Tesla does collapse, going to zero as some of its more aggressive short-sellers hope it does, we could lose five or ten years in the framework of the twenty we have to work with.

We simply can't lose those years.

So just as General Motors and Chrysler were too big to fail in the financial crisis — their demises would have displaced hundreds of thousands of workers and blown a hole in US GDP — Tesla is too big to fail in the face of a climate crisis.

If you're a tough-minded businessperson, you might conclude that this isn't fair. And you would be right. But some things are bigger than business, and the prospect of global famines, disease, and destruction are such things. I'll admit that in this context, Tesla has an exorbitant privilege. And the company isn't our only hope. There are plenty of other ways to decarbonize the world and stave off catastrophe.

But Tesla is the sole enterprise that's both attacking the problem of tailpipe emissions at its source, by eliminating the tailpipe and eliminating the emissions, and promoting additional solutions. For example, Musk is probably the world's biggest proponent of solar power. He's also called for a carbon tax, which along with carbon markets is one of the ways that economists frequently argue we could hit some of science's more ambition climate-rescuing targets.

I'm 51, and I'm here to tell you, 20 years isn't a lot of time. If just a few of the UN panel's dire predictions become reality by 2040, we'll be profoundly regretful that we'd didn't act when we knew what was coming, as long as we aren't starving or drowning by then and have the spare time to engage on profound regret.

If you truly have faith in capitalism, then you have to accept that from time to time, the system creates a company that matters beyond money and the silly ups and down of the stock market. Tesla is one of those companies. Live with it — assuming you want to continue living on a habitable Earth.